Compass Point reiterated a Neutral rating on Essent Group (NYSE: ESNT), and cut the price target to $22.00 (from $25.00), ahead of the company's 4Q earnings report. Core EPS of $0.47 missed Compass' estimate, but was in-line with consensus. The core miss was due to lower earned premiums from lower-than-expected portfolio growth. Management expressed a positive outlook for the industry heading into 2016, and ESNT's market position remains strong. New business volume is expected to be similar to 2015 for the industry overall. Estimates reflect 1% YoY NIW growth.

Analyst Amy DeBone commented, "We reiterate our neutral rating, reduce our price target to $22 from $25, reduce our 2016 estimate to $2.20 from $2.23, and introduce our 2017 estimate of $2.56, which reflects earnings growth driven by portfolio growth and positive operating leverage. ESNT reported core EPS of $0.47, missing our $0.48 estimate due to lower premiums generated from lower-than-expected new insurance written (NIW). Our new earnings estimates reflect slower portfolio growth and stable market share at 12%; our previous estimates incorporated a gradual increase in market share to 13%. Our $22 price target is based on 10x 2016 EPS, below the historical multiple given general uncertainty surrounding the impact of post-PMIERs rate adjustment strategies on PMI industry market share and returns, which has resulted in a downward adjustment to industry P/E multiples. We continue to believe that current valuations overly discount the impact of PMIERs on levered ROEs, and overlook insured purchase market growth prospects. While our price target offers 28% upside to the current price, our Neutral rating is based on lower upside relative to peers. However, with very low credit risk given that the portfolio is still relatively young, no outstanding debt, and potential for positive operating leverage over the next few years, ESNT is positioned well heading into 2016. While ESNT continues to trade at a premium to peers, current valuation offers limited downside."

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Shares of Essent Group closed at $17.15 yesterday.